Pound, Dollar, Euro And Yen Will Be Worthless Within Five Years by Egon von Greyerz
- Gold Switzerland | January 28, 2017
The new US Administration
has taken over with the conviction that they will “make
America great again”. I really wish they will succeed because
the strong US would be good for the world. Sadly, the odds
of achieving that admirable objective are totally stacked
against them. At the end of the next 4 years, there is a
risk that this Administration will be more hated than any
government since Carter and possibly even more disliked
Trump unlikely to reverse 100 years
The coming unhappiness with Trump and his
team will not arise because of the actions they take. They
will clearly do everything in their might to make America
great again. But the probabilities are totally against them
to achieve this goal. They are taking over power at a time
when the debt has grown exponentially since the 1970s. They
are also assuming the power of a country that has not achieved
a proper budget surplus for well over half a century. Even
worse, the US has not had a positive trade balance since
the early 1970s. So here we have a country that has been
living above its means for decades and has no real chance
of changing this vicious circle. Trade wars and import taxes
are unlikely to improve the situation.
Myths, Misunderstandings and Outright lies
about owning Gold. Are you at risk?
The Federal debt is at $20 trillion and
has been growing at the rate of 9% per year for the last
40 odd years. The forecast for the next four years is that
the growth of the debt will accelerate. Total US debt is
over $70 trillion or over 3.5x GDP. But that is just a fraction
of the US liabilities. Unfunded liabilities are over $200
trillion. Add to that the real gross derivative position
of US banks which probably at least $500 trillion. The New
Case for Gold James Rickards Best Price: $5.44 Buy New $8.20
The success of a president in the US is
closely linked to the performance of the stock market. Therefore,
the best chance for a president to be loved by the American
people and being re-elected is for the stocks to go up.
P/E’s on the S&P index is now at 70% above its historical
mean – hardly a position from which it is likely to surge.
Corporate borrowings have surged since the Great Financial
Crisis started. In 2006 US corporate debt was just over
$2 trillion. Today it is more than 3x as high at $7 trillion.
At the same time, cash as a percentage of corporate debt
is declining and is now 27%. Within this massive increase
in debt, there are major defaults looming in many areas
like car loans, student loans and the fracking sector where
potential write-offs could be in the $ trillions.
US Corporate Debt has trebled since
Too many have no or inadequate pension and
no savings – a looming catastrophe
The Case for Gold Ron Paul, Lewis Lehrman
Best Price: $4.18 Buy New $4.99 Another disaster which is
guaranteed to happen in the US and the rest of the world
is a pension crisis. Most people in the West have no or
a minimal pension. Even for the ones who have proper pension
plans, they are greatly underfunded.
It is estimated that US State and Local
Government pensions are underfunded to the extent of $6
trillion. And this is after a long period of surging stocks
and bonds. Imagine what will happen to these pensions when
stocks and bonds collapse which is likely to happen in the
next few years.
The table below shows that 80% of Americans
aged 25-64 have zero or 1x earnings in pension savings.
In the 55-64 year age group, 40% of the people have no pension
savings and 60% have zero or 1x earnings. When the downturn
hits the US, the majority of the US people will have no
savings and no pension. This will create a crisis of unthinkable
proportions. Many Americans will be without a home and without
food since most people are only one paycheck from bankruptcy.
The US Pension Crisis
The coming financial crisis will of course
lead to unlimited money printing not just to help the American
people but also to prop up a failing financial system as
the defaults rise exponentially.
The impending catastrophe will not be limited
to the United States but will affect the whole industrialised
world. As the most indebted country in the world, the US
will be hit very badly and the Trump Administration will
be blamed. It is of course not their fault but the result
of 100 years of mismanagement. Sadly though, the people
in charge of the country will be blamed in spite of their
efforts to save the situation.
As the US economy crashes and money printing
starts in earnest, the dollar will end its reign as the
world’s reserve currency. Since Nixon ended the gold backing
in 1971, the dollar has not deserved the status of reserve
Trump realises that a weaker dollar would
make American exports more competitive and also lead to
US manufacturing coming back onshore rather than in China
and Mexico. What he might not appreciate is that the strongest
economies have the strongest currencies like Germany and
Switzerland. A prospering economy has always gone hand in
hand with a strong currency. Countries that continually
devalue are without exception weak and badly managed economies.
The only money that has survived
in history is not man made
And this is exactly what has happened to
the US since the dollar lost its gold backing.
To measure currencies against each other
never tells the whole story. Since all currencies are in
a race to the bottom, the only correct way to measure the
absolute performance of a currency is against a fixed value.
Gold is the only money which has survived throughout history.
And still gold is far from perfect, especially in recent
times when the price has been kept down by a massive amount
of paper gold issued by futures exchanges and banks. Once
this paper gold market defaults, gold will go up by multiples
of the current price.
So let’s have a look at how gold has performed
against the only real or true money that has ever existed.
The reason why gold is real money is because it is the only
currency that nature has produced. Sadly, no money that
man has produced has ever survived. The table below confirms
history. In a short 45 years the best performing currency,
the Swiss Franc has lost 87% against gold whilst the two
worst ones the dollar and the pound have lost 97% and 98%
It is absolutely remarkable that the US
and UK currencies in just under half a century have lost
all but 3% and 2% of their value. The table above confirms
that all the above currencies will reach their intrinsic
value of ZERO in the next few years. Something that has
fallen in value by 87-98% is guaranteed to complete the
journey until it has lost 100%. Anyone betting against that
would be certain to lose his bet. So it is not a question
of if but only of when. I have been predicting for a while
that the overvalued US dollar is the next currency to fall.
Technically it looks like the coming dollar collapse could
have started. Trumps statement that the dollar is too strong
might be just the catalyst needed.
Bearing in mind that the world is now standing
on the edge of the precipice, the next phase could happen
very quickly. Because we are now looking at a situation
when every major nation in the world has an insoluble debt
crisis. This does not just include all Western countries
but also China, Japan and most emerging market nations.
We must remember that the few percentage
points left to reach a worthless currency for the countries
above mean a further loss of 100% measured from today. So
in this “gold” table lies the answer to what will happen
next, which is a debt and dollar collapse which will lead
to global money printing of proportions never before seen
in history. This hyperinflationary phase which could take
place in the next few years will totally destroy the value
of all money and also of many of the bubble assets that
were financed by the credit boom.
Gold $10,000 and Silver $500 guaranteed
When this situation unfolds in the next
few years, gold is guaranteed to go well above $10,000 in
today’s money and silver over $500. But we are of course
not going to see today’s money in a hyperinflationary world.
Therefore, the gold and silver prices will depend on how
much money is printed. A price of $ 100 billion or $100
trillion per ounce like in the Weimar Republic would not
be impossible. But that is of course a meaningless level
in today’s terms. What is certain however, is that gold
and silver will vastly outperform inflation and therefore
do a lot better than just maintaining purchasing power.
It is virtually impossible for most of us
to fathom what will happen to the world’s financial system,
to currencies and to precious metals in the next few years.
But what is certain is that physical gold and silver at
current prices represent the best form of wealth preservation
and insurance that anyone can own. Owning precious metals
in the coming crisis should not be an option but a necessity.